09ASTANA481, KAZAKHSTAN: SPECIAL 301 REVIEW FOR 2009

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Reference ID Created Released Classification Origin
09ASTANA481 2009-03-17 09:58 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO1538
RR RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK
RUEHKW RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW
RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0481/01 0760958
ZNR UUUUU ZZH
R 170958Z MAR 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 4934
INFO RUCNCIS/CIS COLLECTIVE 1375
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0752
RUEHKO/AMEMBASSY TOKYO 1455
RUEHUL/AMEMBASSY SEOUL 0439
RUCNDT/USMISSION USUN NEW YORK 2217
RUEHNO/USMISSION USNATO 2547
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0935
RUEKJCS/SECDEF WASHDC 0848
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL

UNCLAS SECTION 01 OF 05 ASTANA 000481 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EB/TPP/IPE (MCGOWAN) 
STATE PLEASE PASS TO USTR FOR CHOE-GROVES 
COMMERCE FOR ITA/MAC/OIPR (PETERS) 
 
E.O. 12958: N/A 
TAGS: PGOV ECON ETRD KIPR KZ
SUBJECT:  KAZAKHSTAN:  SPECIAL 301 REVIEW FOR 2009 
 
REF:  STATE 8410 
 
1. (U) Sensitive but unclassified.  Not for public Internet. 
 
2. (SBU) SUMMARY: Over the past year, the Government of Kazakhstan 
(GOK) has continued to demonstrate a commitment to the development 
and modernization of its IPR protection regime.  The Government of 
Kazakhstan, and more specifically the IPR Committee of the Ministry 
of Justice, continues to move forward in addressing the concerns of 
the international community for the enhanced protection of IPR on 
the legislative, judicial, and enforcement fronts.  The Government 
of Kazakhstan continues to work on legislation to further empower 
customs officials to seize counterfeit materials before they enter 
the country.  In addition, the year 2008 witnessed the first 
criminal sentence for a convicted IPR violator.  Proposed 
legislative changes expected to come to Parliament for ratification 
in 2009 should further improve the IPR environment.  Post recommends 
continuing Kazakhstan's exclusion from the Special 301 Watch List. 
END SUMMARY. 
 
ENFORCEMENT INCREASES, BUT CRIMINAL SENTENCES LAG 
 
3.  (SBU) According to combined statistics released by the Ministry 
of Justice IPR Committee and the Procurator General, the following 
actions were taken in enforcement of IPR legislation in 2008: 
 
-- 991 criminal cases were initiated (compared to 658 in 2007); 
 
-- 707 inspections were conducted by the Ministry of Justice.  As a 
result, 495 administrative cases were initiated -- including 477 
cases for the violation of copyright and allied rights; 4 cases for 
the violation of rights on inventions, useful models, and industrial 
patterns; and 14 cases for the illegal use of trademark -- and 437 
individuals were prosecuted administratively; 
 
-- 5,687,239 KZT (or $47,275.50) was collected in administrative 
fines (compared to 20,250,755 KZT or $168,335 in 2007); 
 
-- 200,972 counterfeit copies and products with illegal trademarks 
valued at 95,105,926 KZT ($790,572.90) were confiscated (compared to 
132,369,884 KZT, or $1,100,331, worth in 2007); 
 
-- 24 manufacturers of counterfeit products and 4 warehouses for 
counterfeit products were uncovered; and 
 
-- 4 channels for importing counterfeit products were suppressed. 
 
4.  (SBU) According to the General Prosecutor's Office, 415 criminal 
cases were sent to the courts, of which 170 people were convicted 
under Article 184 of the Criminal Code, and one person under Article 
184-1.  (NOTE: Parts 1-3 of Article 184 represent, in order, 
increasing categories of severity in both the level of the offense 
and severity of punishment based on the amount of damage, scale of 
the offense, repetition of the violation, etc.  END NOTE.) 
Penalties for those convicted of violations of Article 184 vary. 
They include fines ranging from 100 to 700 times the Monthly 
Calculation Unit (one Monthly Calculation Unit is currently set to 
1,273 KZT, or $8.50), the confiscation of 5 to 10 months' wages, 
community service of 100 to 240 hours, or imprisonment from 2 to 5 
years and the possible confiscation of property. 
 
5.  (SBU) According to private industry representatives, the actual 
number of raids conducted in 2008 was reduced by almost half in 
comparison to the previous year. Private industry representatives 
account for this in two ways.  First, On February 1, 2008 the 
Government of Kazakhstan enacted a year-long moratorium on 
inspections of small and medium enterprises in an effort to ease 
administrative burdens on business in the wake of the global 
financial crisis.  (NOTE:  This moratorium has since been extended 
until July 1, 2009.  END NOTE.)  Second, private industry 
representatives believe that an increase in crime rates associated 
 
ASTANA 00000481  002 OF 005 
 
 
with the deteriorating economic conditions have led to refocus of 
law enforcement efforts away from addressing piracy and toward 
addressing other crimes. 
 
FIRST INCARCERATION FOR IPR VIOLATIONS 
 
6.  (SBU) The first significant criminal sentence for IPR violations 
was delivered by the courts in 2008.  Unlike previous cases where 
convicted violators were given suspended sentences, one vendor of 
counterfeit products was sentenced to two years imprisonment in East 
Kazakhstan oblast under Article 184 (parts 2 and 3) of the Criminal &#
x000A;Code.  This is considered by some public and private officials to be 
an extraordinary example of enforcement in Kazakhstan, as well as 
the CIS as a whole.  However, the President the "Copyright and 
Related Rights Association," a Kazakhstani IPR NGO, maintains that 
the "big fish" in the piracy market remain at large. 
 
RULING PARTY ENDORSES IPR ENFORCEMENT 
 
7.  (SBU) In 2008, the ruling Nur Otan party lent its support to IPR 
protection.  Zhas Otan, the youth wing of the Nur Otan, organized 
several Astana-based campaigns in connection with IPR protection, 
including anti-piracy round tables and public rallies.  According to 
private industry representatives, the campaigns have significantly 
contributed to raising IPR awareness and clearing the streets of 
Astana of vendors of pirated audio and video products. 
 
NEW AND CONTINUED CHALLENGES 
 
8.  (SBU) Under the new Tax Code, which went in effect in January, 
copyright holders are not exempt from payment of duties when filing 
suit for copyright violations.  Article 541 of the Tax Code grants 
such an exemption to authors, but not to affiliated rights holders. 
Some private sector representatives consider this to be inconsistent 
with international standards.  As a practical matter, injured 
parties will lose a percentage of the estimated value of the damage 
inflicted by piracy whenever they file a legal claim. 
 
9.  (SBU) Outside of Kazakhstan's two largest cities (Almaty and 
Astana), the vast majority of pirated media available originates in 
Russia and China.  Russia -- with its many railway links to northern 
Kazakhstan -- presents a particular challenge for Kazakhstani 
authorities.  As noted by the IIPA, customs officials continue to 
lack the ex officio authority required to seize counterfeit 
materials at the borders when such materials are discovered. 
 
10.  (SBU) According to private industry representatives, 2008 has 
witnessed an increase in the availability and sales, particularly in 
Almaty and Astana, of domestically produced counterfeit CDs and 
DVDs.  This is largely due to the increasing availability of 
pirating technology and the willingness of small-time media pirates 
to engage the police in the "cat and mouse" game of street sales. 
Industry representatives assert that local police charged with 
enforcing the prohibition of street sales are often unmotivated and 
indifferent to the presence of such vendors, if not directly paid to 
ignore them. 
 
11.  (SBU) According to the Fifth Annual Business Software 
Association (BSA) and IDC Global Software Piracy Study, the software 
piracy rate in Kazakhstan was approximately 70% in 2007.  Local 
software industry experts believe that internet piracy has also 
became widespread in Kazakhstan over the last several years.  In 
addition to widespread file-sharing technologies, such as the 
open-source application BitTorrent, that facilitate the direct 
distribution of pirated audio and video over the internet, private 
industry representatives from Almaty have noted the launch of 
several internet delivery services there.  According to these 
sources, customers can order pirated movies over the internet and 
have them delivered just as they might a pizza to their front door. 
These operations have reportedly proven very difficult to physically 
locate. 
 
ASTANA 00000481  003 OF 005 
 
 
 
12.  (SBU) The pursuit of rulings against IPR violators in civil 
courts remains problematic because of legal norms carried over from 
Soviet times.  According to the Prosecutor General's office and 
private industry representatives, this is particularly so when 
licensed copyright holders attempt to sue vendors of pirated 
material for damages.  Under current IPR legislation, plaintiffs are 
subject to an unnecessarily heavy burden of proof, whereby they are 
required to demonstrate a direct contractual link to the artist or 
author whose pirated material is being illegally sold.  (NOTE:  An 
example would be a direct contract between a performer and record 
store. END NOTE.)  If a licensed copyright holder or distributor can 
not substantiate this direct linkage, they can not, in the eyes of 
the court, demonstrate financial damages caused by illegal sales. 
In addition, civil claims must also be brought in a court in the 
region where the infringement is alleged to have occurred.  Regional 
courts tend to lack regular exposure to -- and knowledge of -- this 
relatively new and complex area of law, which has historically 
inhibited the successful prosecution of violations. 
 
OPTICAL MEDIA PROTECTION 
 
13.  (SBU) Currently only one plant producing optical discs 
specializing in films and music remains operational in Kazakhstan. 
The plant has source identification codes (SIDs) issued by the IFPI 
(International Federation of the Phonographic Industry) and, as the 
International Intellectual Property Alliance (IIPA) notes, provides 
samples of its products for use as forensic evidence. 
 
SOFTWARE INDUSTRY ENGAGEMENT 
 
14.  (SBU) According to local Microsoft representatives, all newly 
procured government computers have licensed software.  Recognized 
for its successes in defense of IPR in Russia, Microsoft 
representatives did express hope that its intensifying partnership 
with the Government of Kazakhstan will improve IPR preventative and 
enforcement capacity, particularly in the field of internet-based 
piracy. 
 
15.  (SBU) Despite positive relations developing between Microsoft 
and the Government of Kazakhstan, Microsoft representatives continue 
to recommend that Kazakhstan be placed on the Special 301 Watch 
List.  Findings from Microsoft-funded research indicated that levels 
of privately used pirated (or unlicensed) software remains extremely 
high.  According to their current estimations, approximately 90 
percent of privately owned PCs in Kazakhstan use illegally obtained 
software. (NOTE: In 2008, Microsoft sold only 2,000 software 
licenses in Kazakhstan.  Microsoft data also indicate that the 
overwhelming majority of respondents believe piracy rates would 
decrease if the prices of commercially available software were to be 
lowered.  END NOTE.) 
 
SCHEDULED AND ENACTED IPR LEGISLATIVE IMPROVEMENTS 
 
16.  (SBU) During the reporting period, Kazakhstan continued to 
pursue legislative changes that strengthen the government's hand in 
protecting intellectual property rights.  The legal basis for 
preventing and prosecuting IPR violations remains the "Law on 
Amending Legislative Acts of the Republic of Kazakhstan on the 
Issues of Intellectual Property", which entered into force on 
November 26, 2005.  This law amended the country's Criminal Code, 
Criminal Procedure Code, Civil Code, Administrative Code, and the 
Copyright Law as they pertain to the protection of intellectual 
property.  Amendments to the Patent Law were ratified in 2007, 
significantly s
implifying the patent system (as compared with the 
old Soviet two-stage system) and bringing it into closer conformity 
with international standards. 
 
17. (SBU) In June 2008, the Government of Kazakhstan amended laws 
concerning domestic (internal) trade with the aim of preventing the 
illegal distribution of pirated audiovisual products and software in 
 
ASTANA 00000481  004 OF 005 
 
 
"spontaneous markets," meaning sales on the streets, in bazaars, and 
at unlicensed kiosks.  According to the amendments, audiovisual 
products may only be sold in stores.  Members of the Ministry of 
Justice's IPR Committee are confident that this measure will reduce 
the spread of counterfeit products. 
 
18.  (SBU) Proposed amendments to the Copyright Law, Law on 
Licensing, and Customs Code are currently being evaluated separately 
by independent experts and members of Parliament.  Proposed 
amendments to the Copyright Law have been praised by private 
industry representatives in as much as they directly address the 
weaknesses hindering copyright enforcement in civil courts (see para 
7 above).  According to private industry sources, the proposed 
amendments will relieve IPR holders of the heavy burden of proof and 
facilitate more effective law enforcement.  In accordance with WIPO 
requirements, the draft amendments also detail the use of technical 
means for the protection of copyrights, and specifically prohibit 
the removal of any types of technical or coded copyright protection 
technologies.  All digital media designated for commercial sale 
whose technical copyright protection has been deliberately tampered 
with will by default be considered counterfeit and its owners will 
be subject to prosecution.  Representatives from the Ministry of 
Justice's IPR Committee expressed confidence that this will greatly 
enhance IPR protection in Kazakhstan.  Finally, changes to the 
Copyright Law would also improve governance of Kazakhstani copyright 
associations, forcing increased transparency and accountability in 
the registration of licenses and collection of associated royalties 
and fees.  According to the Chairman of the IPR Committee, the 
amendments to the Copyright Law are expected to be approved by 
Parliament by July 2009. 
 
19. (SBU) The IPR Committee believes that the proposed amendments to 
the Licensing Law stipulating mandatory licensing for the commercial 
reproduction of any copyright protected audio and visual recordings 
meet WTO requirements.  These amendments are expected to come before 
Parliament by the end of 2009. 
 
20.  (SBU) Amendments to the Customs Code granting ex officio 
authority to customs agents are expected to be considered by 
Parliament in 2009.  These amendments will grant customs agents the 
authority to more readily seize counterfeit goods at the border, 
which has long been recommended by the International Intellectual 
Property Alliance (IIPA.) 
 
IIPA REPORTING AND CONCERNS ADDRESSED 
 
21.  (SBU) Over the last several years, IIPA reporting has 
consistently reiterated several concerns regarding the development 
and efficacy of IPR protective measures in Kazakhstan.  They have 
also, however, continued to report several significant inaccuracies. 
 
 
22.  (SBU) The IIPA report states that "only the Ministry of Justice 
(Copyright Office) and not the police can bring charges for 
[administrative violations]" and recommends "that the existing 
police authority be broadened to include administrative violations 
as well."  Article 620 of the Administrative Violations Code 
specifically provides such powers to the police. 
 
23.  (SBU) The IIPA's assertion that the 2004 statutes only provide 
for a 50-year term of copyright protection is inaccurate, as the 
November 2005 amendments specifically provide for the extension of 
copyright protection to 70 years, in keeping with international 
standards. 
 
24.  (SBU) The IIPA repeats another error from its previous reports, 
overstating the minimum damages threshold for criminal prosecution. 
IIPA misinterprets what it calls "the key amendment" in the November 
2005 legislation. i.e., the change to Article 184 of the Criminal 
Code, which repealed the undefined "huge damage" threshold for 
criminal cases and replaced it with a threshold of 100 Monthly 
 
ASTANA 00000481  005 OF 005 
 
 
Calculation Units (MCU's).  The IIPA again incorrectly reported that 
damages must exceed 100 times the government-set monthly wage.  In 
fact, there is a large difference between an MCU and the monthly 
wage: one MCU currently equals 1,273 tenge, or $8.50, and the 
monthly wage in 2008 was 60,734 tenge (about $504.85) -- which means 
that the threshold for prosecution is just $850.00 (100 MCUs) in 
damages, not, as the IIPA believes, $50,485 (100 times the monthly 
wage). 
 
25. (SBU) The IIPA cites Kazakhstan's need to establish a legal 
basis for the confiscation and destruction of equipment used in the 
criminal manufacture of pirated goods.  The IPR Committee continues 
to assure post that a combination of statutes in the Criminal Code 
and the Criminal Procedure Code constitutes an adequate provision 
for the confiscation of such equipment.  Moreover, the IPR Committee 
has stated that such confiscations are routinely carried out and do 
not require a court order.  A court order is necessary only to 
destroy such equipment -- a procedural requirement which the IPR 
Committee defends as necessary to preserve potentially material 
evidence. It should also be noted that the abovementioned proposed 
amendments to the Copyright Law will require judges, in the event of 
a conviction, to make a ruling regarding the named piracy equipment. 
This provision is expected to increase occasions in which 
confiscated equipment will be destroyed. 
 
26. (SBU) The IPR Committee of the Ministry of Justice is the 
authorized government agency for IPR protection.  In contrast to 
what was stated in the IIPA report, the Ministry of Culture and 
Information has no role regarding this issue.  However, the Ministry 
of Internal Affairs, General Prosecutor's Office, and the Financial 
Police are all partner organizations in the enforcement of IPR 
legislation. 
 
27.  (SBU) COMMENT: Kazakhstan's continued progress on and 
commitment to IPR protection merits its continued exclusion from the 
Special 301 Watch List.  At this stage, acknowledging Kazakhstan's 
significant achievements while stressing to the Government of 
Kazakhstan that they must continue to enhance their IPR efforts is a 
better approach to facilitate further U.S.-Kazakhstani IPR 
cooperation and achieve results on the grounds than returning 
Kazakhstan to Watch List status.  END COMMENT. 
 
HOAGLAND

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